Better safe than sorry. Bank corporate governance, risk-taking, and performance

Conventional wisdom leads to assert that good governance may underpin bank performance while bad governance destroys stability and soundness. We run a factor analysis to synthesize 23 bank board characteristics of the Eurostoxx banks into seven key features: independence, size, dedication, tenure, corporate governance quality, external perspective, competence, and diversity. We then use multiple regression and find that independence and board and committees size are the most relevant characteristics for banks risk-taking and in line with the agency theory, our results show that independence increases the solvency of banks, and size reduces it.